'Firemen' fight transatlantic trade-war flames

By
David Fouquet, Special to The Christian Science Monitor /
March 20, 1980

Brussels

It was nine o'clock sharp, an hour when most diplomats or civil servants are just leaving home in the morning, when American Ambassador Thomas O. Enders unfolded his six-foot-six frame out of his chauffered checker limousine and briskly strode into European Common Market headquarters here recently.

The morning meeting between Mr. Enders, who represents American interests before the EC, and his European counterparts was another in a series of hectic consultations between US and European officials aimed at heading off what is increasingly described as a looming transatlantic trade war.

These contacts and a number of other contacts revolve around several economic difficulties that threaten billions of dollars in trade and which could spill over into more general political links between the two sides of the Atlantic.

Up to now, protectionist pressures have resulted the loss of some $40 million in US trade to Europe. But other emerging trade problems also are menacing billions of dollars in commerce and may become a serious test of the new trade rules painstakingly worked out for six years in the recently concluded Tokyo round of trade and tariff negotiations.

While previous trade disputes between the US and the Common Market have erupted sporadically in the past decade, through close diplomatic contacts, they were generally contained and never escalated to the level of a trade war. The current difficulties, however, are taking place against the background of depressed economic conditions and some political friction over Western disunity concerning Iran, Afghanistan, the Olympic boycott, energy, and interest rate policies. Ambassador Enders and other also point to political campaigns under way or beginning in the US, West Germany, and France, which might make protectionist pressure harder to resist.

His advice is to "keep a sense of balance and not pander to protectionist sentiment. Nobody has a monopoly on protectionist pressure. We don't have to be free-trade nuts, but we also don't have to defend our purity on every commodity."

The EC officials he meets with regularly are also trying to dampen the fires of controversy. Sir Roy Denman, the EC director-general for external relations, remarked recently that "we're both in the business, on both sides of the Atlantic, of damage limitation."

But the fact is that they are dealing with a number of issues they fear could get out of control and escalate into a chain-reaction affecting a considerable amount of trade between them and some of the biggest export earners such as steel, soybeans, petrochemicals, and other major industries.

The first shot in the current conflict came a few weeks ago when the EC executive commission here, which has jurisdiction over EC countries' foreign trade policy, authorized Great Britain to apply quotas on two American artificial fibers.

British and Italian manufacturers had been complaining for months about lower-priced American carpet yarns unfairly capturing an increasing share of their markets because they benefit from US government control of prices on oil, which is the base for these petrochemical products. The EC approved quotas in two such product lines and rejected one. But the problem is only beginning since the Italian cases are still pending. British firms say the restrictions are insufficient and the Americans are seeking compensation under international trade rules for the $40 million in losses because of the quotas.

Similar squabbles in two major trade categories are also pending that could cause a further deterioration in relations. These involve European steel exports to the United States and US shipments of soybeans to Europe.

The world-wide international crisis in steel, with which most industrial societies have been trying to cope in recent years, threatens to erupt into another transatlantic dispute of major proportions soon. US steel companies are warning they will seek protection against what they feel are artificially low subsidized prices for Common Market steel to the United States. Should these antidumping suits go through, EC officials say they might mean $1.3 billion in lost trade. Noting that some 120,000 jobs have been lost in the EC steel industry in recent years, EC commissioner for industry Etienne Davignon told an international steel meeting in Paris last week that "if we enter in a trade and protectionist war in steel, automobiles will rapidly follow, and after automobiles, it will be shipbuilding and all high-technology industries."

Americans, on the other hand, are just as concerned about losing some of their $3 billion in annual exports of soybeans to the Common Market because of pending EC restrictions.

This biggest US export item to Europe may be subjected to an EC tax on vegetable oils aimed at encouraging European consumption of surplus olive oil expected when Greece and Spain join the EC in the years to come. Similar reductions in soybean imports have been studied in the past as a means of substituting surplus EC milk powder as a protein element in animal feed. But American pressure has always succeeded in sidetracking such moves and the EC is still hesitating in the current case.

These problems are also being aggravated by possible US restrictions on Italian shoes and EC crackdowns on petrochemical urea fertilizers. US Ambassador Enders feels the new international trade rules can help keep these problems from spiraling into a general trade war. "We have the tools to prevent trade from developing into a problem for the (Western allied economic) consensus ," he said recently. But he feels that each controversy has to be treated calmly and separately to avoid one issue contaminating another. "I want to establish the principle of no linkage," he says, "but there are a lot of powder trails around."